Thank you for your response. If you look at AirBNB, they have been profitable for a while, until about Q4 2019. Their revenue in 2019 was over 1 billion dollars, and the reason why they made a net loss in Q4 was, according to Blumberg, marketing. They are directly competing against companies like Booking.com, which essentially has the same business model (providing marketing and exposure to customers), except they started with the hotels, but are now taking away AirBnB’s shares in non-hotel accommodations.
If you look at Uber’s spendings (and I bet the same is true for Grab or any other of a dozen or so Uber competitors), the largest are is — surprise — again, marketing — not tech. In some years it is R&D, but this is a voluntary position and I will write a bit on that further down. Operations and Support — ie the “tech is expensive” part, come in about fourth, with “General and Administrative” above that — for a company where most operations are fully automated, this is a bit peculiar, don’t you think?
Some of the expense comes from borrowing very, very heavily in order to expand quickly. The main cost of the expansion, is, again, marketing.
The reason why Uber has a massive amount of competitors, and has to spend massive amounts of money on marketing (and still lost to Grab in Southeast Asia) is that the complexity of their technology stack is negligible, and their only advantage was, that they were there early and had raised massive amounts of capital. This is true for pretty much all the well-known economy sites — if you look around a bit, you will find virtual servers with decent connections for $4 a month, and courses on Udemy and Coursera in which you literally build copies of Booking.com, AirBNB, and other websites. If you are a dilligent developer, you can replicate most of the necessary technology stack all the way to an MVP in about 3–4 months. By yourself!
What that does not give you, is scale or exposure. If you managed to achieve enough exposure to actually fully load that $4/month server I mentioned earlier, you would have enough revenue to scale out naturally … but by that time someone else will have copied your business model and out-advertised you with investors’ money.
Where does it leave us? The main “service” those companies provide, is not technology, it is marketing and scale. Given a large enough “driver’s union” or a coop, or a Craigslist equivalent for ride shares — something with enough exposure, it would be more or less trivial to replace Uber in a country. In fact, some drivers down here have an Uber account and a Grab account and drive for both — whichever sends them a more convenient customer that moment.
What about Uber’s enormous R&D position then? Their research is, as far as I got it, focussed on driver-less cars. Which will essentially remove the entire gig economy side of theirs, and make them into a robotaxi provider — where they will actually own their cars. It will convert them into a traditional capitalist venture. I would bet that if Tesla achieves full autonomy, they could easily beat going the “we don’t own those cars” route — simply because they don’t have to own the hardware.
So my take on the value of those companies is ALL the “gig economy” companies (which includes companies like eBay, Lazada, etc) are marketing ventures first, and anything else they do second. They could all as well just be one and the same company. And in the end they probably will be.
